Every MSP board pack has the same chart: monthly recurring revenue, going up and to the right. It is the number investors value you on and the number your sales team is paid on. It is also, very often, hiding a problem.
Not all recurring revenue is equal. Some of it is the best revenue you will ever earn. Some of it costs more to deliver than it brings in, generates a disproportionate share of your service desk tickets, and makes your engineers miserable. On the MRR chart, both look identical.
How bad MRR gets in
It rarely arrives by accident. It arrives through reasonable decisions that compound:
- Logo-chasing. A small contract gets discounted to win a name, on the promise that it will grow. It doesn't.
- Packages that stopped matching reality. An entry-level support offering priced three years ago, before the customer doubled their user count and their expectations.
- Renewals nobody owns. Contracts roll over at the old price because no-one is accountable for reviewing them before they renew.
- Acquired books. Buy-and-build brings in contracts priced on someone else's cost base, which nobody re-underwrites after the deal.
Three questions that expose it
You don't need a new system to find the problem. You need to put three numbers next to each other for every contract:
- What does it bring in? Monthly value, not headline contract value.
- What does it cost to serve? Ticket volume is a good proxy. Revenue per ticket is a better one.
- When does it renew, and who owns that renewal? If the answer to the second half is "the account manager, probably", that is the answer.
Sort by revenue per ticket and the picture changes quickly. The bottom of that list is where margin goes to die.
Grow, reprice, or let go
Once you can see it, every contract falls into one of three groups:
- Grow. Healthy margin, good relationship, room to expand. These deserve your best people and a proper account plan.
- Reprice. Worth keeping, but not at today's price or scope. Start the conversation well before renewal, with a clear new offer rather than an apology.
- Acceptable churn. Contracts that will never be profitable. Protecting every logo sounds safe; in practice it ties up delivery capacity you need for the first group.
This is a leadership decision, not a finance exercise. Someone has to be willing to say that a shrinking logo count can be a sign of a healthier business, and hold that line when the first customer pushes back.
Where to start
Give every recurring contract a named owner. Put renewals into the weekly sales rhythm, not a quarterly clean-up. And add one line to the board pack beneath the MRR chart: how much of this would we sign again, on today's terms?
If the honest answer makes the room uncomfortable, that is the most useful number in the pack.